It’s definitely not escaped the attention of most watch lovers that the prices of Rolex professional sport watches have risen over the past few years, and have continued to rise even in the face of a global pandemic. While it’s hard to know if these unbelievable price levels can be sustained, there seems to be enough strength in the pre-owned market to suggest that at the very least, any backward slide will be minimal due to the strong brand equity of Rolex.
With Rolex professional models commanding a premium in the pre-owned market way above the retail price, it’s no surprise that reports of all sorts of shenanigans have taken place. You might have heard stories of Authorized Dealers (AD’s) selling out the back door to pre-owned dealers for instant profit, or wealthy VIP customers buying undesirable watches to get the hot models to be flipped for profit. I’ve even heard of and from scores of regular punters putting their name on the waiting list with the intention to flip the watch for profit if their name comes up.
These are all things we’ve heard happening and are difficult to verify for the most part, since these dealings are usually done in the shadows, but there are enough stories to suggest that it is mostly true, which leaves the typical watch lover who wants to buy a Rolex sports model like the Submariner, Daytona, GMT Master 2 and Explorer 2 in a bit of a bind, since the love of the watch might give way to the temptation of using one’s current or potential Rolex as a way to make some money.
Why you probably shouldn’t try to make money with Rolex.
1. The Bid Ask spread means profits are limited
When there is a market and there are dealers involved, there are usually two prices to take note of, which in financial market parlance is the Bid and the Ask. The Bid is the higher price which is what a dealer will sell to you at, and the Ask is the lower price that a dealer will buy it from you. Where the dealer makes his profit is in the spread or difference between the two.
If this is difficult to understand, think of when you needed to change money and were confronted with exchange rates with two numbers side by side. You would normally change money at the rate that is disadvantageous to you.
It’s the same when you want to sell your watch to a dealer. They are in business to make money and they have overheads to take care of, so you might find that their offer to buy your watch might not be the amount you think you can make.
For example, I was offered $7.5K for an Explorer 2 that I bought for $4.2K 7 years ago. Yes I might have been able to make a profit, but not as much as the $10-12K I was expecting which is what the dealer might sell it for.
Another example, a brand new ceramic Daytona might be $35K pre-owned now, but try selling it and the dealer might take it at $27K or less depending on their level of inventory.
Another example, a friend who had a GMT Master 2 pre-owned was offered a price of 10-11K, which is either ok or bad depending on whether he got it at $16K or $10K.
2. Selling on your own is a minefield that can break you
You could of course sell the watch on your own, and if you do it is possible to realize a higher price than with a dealer, but this route comes with all manner of irritations that might make the process very unpleasant. Think from the point of view of the buyer. If you’re a private seller, you will necessarily have to sell at a lower price than the dealer since you have no reputation. Then there will be buyers who will take the opportunity to low-ball you. Even if you find a willing buyer, you might have to accompany them to the RSC (Rolex Service Centre) or an independent watchmaker to get it authenticated.
The worst scenario is of course if a buyer tries to run a scam on you, whether by reversing the bank transfer when the watch is delivered, or claiming that the watch is fake when received and calling the police on you.
There is a reason why dealers exist since they make the whole transaction process easy and fuss free and also the reason why they get a cut from the transaction. Of course, It’s not to say that dealers don’t have to deal with scammers all the time, but at least it’s part of their profession, and not yours as a private seller.
Lastly, say you want to sell your hot Rolex to your friend to avoid the problems that might come with selling to strangers – then would you feel comfortable selling a ceramic Daytona you bought at retail for $16.6K to them for $35K even though it is at the market price? It’s a bit dodgy to do that honestly and what kind of friend are you?
3. Getting banned from the AD
The stories vary widely from country to country but it seems that ADs do keep a lookout for people who flip the watches they buy for profit not long after selling them. I’ve heard that Rolex requires all buyers to have their name recorded when purchasing their watch, and have even seen some examples of AD’s holding on to the buyer’s warranty card for up to a year after purchase in order to discourage the practice.
Again these are not personally verified but if it is true, it does mean that if a watch comes on the pre-owned market then the person who bought it might not be able to buy another hot Rolex in the future anymore at the lower full retail price.
Of course, you might not be interested to buy another Rolex after the one that you were lucky enough to get allocated, and if so then enjoy that small profit you’ve earned, but it’s definitely not a business model that you can rely on to make a living.
In what instances can you make money with Rolex?
1. If you’re a wealthy SOB
Lucky you, and you can get the watches easily, because your AD wants you to continue spending the big bucks for undesirable watches, sometimes from other brands, together with the hot Rolex, in a process called “bundling”. While it might help AD’s move difficult to sell stock, and help out their cash flow, there’s something quite distasteful about it no matter how understandable it can be from a business perspective.
If you are a wealthy SOB, then you (or someone else) might (or might not) have worked hard for your money, and in this world money talks, so I suppose this might be a strategy that is open to you. After all, who can pass up “free money” and it seems to be a form of investment only available to a certain class of people, just like accredited investors are to hedge funds.
By the way, if you’re “bundling”, then you’ll have to find a way to dispose of the undesirable pieces that you have bought, which may or may not be easy depending on what they are, and that might eat into your profit on the hot Rolex. Though you would probably have a way to deal with that already so again, lucky you.
2. You’ve found a valuable family heirloom
Your father or grandfather might have bought a Rolex a long time ago that has suddenly turned out to be the hottest thing on the vintage market now. Great but so what. You were not the one who bought the watch in question anyway, so you didn’t come up with this “investment opportunity”. Sometimes good fortune can come down to pure dumb luck, and if that’s the case, then maybe its God’s way of rewarding your good deeds. Though if you want to sell grandpa’s watch to make some cash, then make sure that the reward is good enough to pay off the family memories that might come with the watch.
Also on this, beware who you sell to because scams are afoot. There are dealers who will take advantage of your ignorance to skim off a big chunk of the market value, and the whole Bid Ask problem also exists when you deal with auction houses with their extra fees.
3. Become a professional dealer
Get some capital together, invest in inventory, get educated on how to authenticate watches, then run your business in a professional manner. Watch dealers are in my experience the smartest guys I’ve ever met, and my guess on how this happens is probably because watch dealing is a business that is rife with scams. Most watch dealers I know have been burned before in large and small ways and in order to survive it’s a matter of keeping ahead of the bad guys.
And that’s before we even get to the fact that sustaining any business is its own challenge in its own right.
What should you do if you want a Rolex sports model?
Some people say that a Rolex watch is like a commodity, and in some ways this is true. Like real commodities in financial markets, the price ranges of most models are known, and there is a liquid enough market to sell them quickly and easily if you need to.
However saying that a Rolex is like a commodity is not saying the same thing as a Rolex actually being one.
Yes, the comparison can be made, but when you get down to it, there are more variables that come into the picture, such as the condition of the watch, the model in question, whether it comes with box and papers and so on, which means that a subjective opinion can be imposed on the transaction to your detriment more easily. Lastly, because it is a specific physical object you are selling, you have to do your deals individually, or over-the-counter (OTC) in financial market parlance, instead of through an exchange with one visible price for everyone.
If you know about financial markets, you’ll know what I mean.
With all that said, I think that it’s important to realize why you want to buy a Rolex whether pre-owned or brand new. Is it because you want to reward yourself? Or is it because you want to own a reliable, dependable watch that is also a recognizable status symbol that is beautiful and enjoyable to wear? If so, then good for you, put your name on a waiting list if you are able, or if you’re impatient, just go ahead and pay the premium in the vast market of pre-owned hot Rolexes (supplied by the wealthy SOB’s) because you’ll probably spend the same amount anyway if the “bundling” process fails for you. Also, since Rolex is a symbol of achievement, you’ll be able to tell yourself that you achieved more, as you had to pay more.
If your name comes up on the waiting list, buy the watch, remove the stickers and enjoy it by wearing it everyday. You were lucky enough to get one, so treat the watch as your good luck charm for all of life’s coming endeavours, and forget about your plans to make the type of small windfall that comes way way short of a winning lottery ticket.
Or if you’re keen on NOT playing these games, and also NOT spending above retail for a nice watch, maybe buy a Tudor instead, like this Black Bay GMT below.